Incorporation Flashcards
What is incorporation?
The process by which a new or existing business registers with Companies House to become a company/LLP
What is the effect of incorporation?
The entity has SLP and owners have limited liability.
What documents must be filed with Companies House to incorporate a company?
o Form IN01
o Memorandum of association
o The company’s AA only if they are not using the default MAs.
o Applicable fee
Upon receiving the incorporation paperwork, what do Companies House check?
o The application meets the requirements of CA 2006
o That the form has been completed correctly
o That the correct fee has been paid
o Check the Disqualified Directors’ Register to check the applicant isn’t barred
If the incorporation requirements are met, what happens?
Companies House will then incorporate the company and issue a certificate of incorporation, this is signed or authenticated by seal by the Registrar of Companies
What does the incorporation certificate confirm?
That the registration requirements have been met.
When does a company legally come into existence?
At the date of the incorporate certificate
What information does the incorporation certificate hold?
Company name and registered number
Date of incorporation
Whether limited or unlimited
* If limited, whether it is limited by shares or by guarantee
Whether it is a PLC or LTD
Whether the company’s registered office is situated in England and Wales, Scotland or Northern Ireland.
If the application was made by post or registration software, what must the company do after incorporation?
Register with HMRC for corporation tax within 3 months
If an online incorporation application is made, does a company need to register for tax?
No, this is automatic.
What is a shelf company?
A shelf company is a company which has already been set up and is ready for a when a client needs to set up a company quickly (i.e. if part way through a transaction)
What is the benefit of a shelf company?
Often quicker and cheaper access to start a company
How is a shelf company set up and transferred?
Usually set up with two Ds and two SHs that are employees of the CFA.
To pass the company over to the client, the initial Ds and SHs will need to:
o Sign a stock transfer form to transfer their shares to the client
o Arrange a board meeting and vote to register new SHs and appoint new Ds;
The initial Ds will then resign, so the company is now controlled by the client
What information is on form IN01?
o Company name
o Registered office
o First directors
o Directors residential and service addresses
o Company secretary
o First shareholder(s)
o Statement of capital
o Details about anyone with significant control
o Statement of compliance
o Statement of lawful purpose
o An appropriate email address
Does a company need a name?
Yes.
What are the rules in relation to the company name?
- It cannot be the same/similar as an existing company
- It cannot exceed 160 characters (inc spaces) or include certain symbols, signs or punctuation
- It cannot be offensive or constitute a criminal offence
- It cannot suggest a connection with the government or sensitive words, unless approved by the secretary of state
Examples of a company name which would be considered the same, even though they are not identical
£ and ‘pound’ would constitute the same name
‘Easy Electrics For You Limited’ is the same as ‘EZ Electrix 4U Limited’.
What is the exception to the a new company having a similar name to an existing company?
If the new company will be part of the same group as an existing company and they have provided written confirmation that they do not object to this i.e. ‘Web Services Limited’ and ‘Web Services UK Limited’
Examples of ‘sensitive words and expressions’ re the company name
‘British’, ‘university’
Does the trading name need to be given on incorporation?
No.
What are the requirements for a trading name?
Similar to those for the company name.
Why is it important to check the company and trading name are not similar to an existing entity?
If it is trademarked, there is a risk of a trademark infringement claim
Even if it is not trademarked, there is still a risk of tort claim of passing off
Rules for company name of a PLC
Company name must end in ‘public limited company’ or ‘plc’ (or Welsh equivalent)
Rules for company name of a LTD
Company name must end in ‘limited’ or ‘Ltd’ (or Welsh equivalent)
What are the rules in relation to the registered office?
- There must be a registered office.
- The RO is public and cannot be private.
- The RO must be in the same part of the UK in which the company is registered.
- It must be ‘appropriate’
Why is the registered office important?
Correspondence from Companies House and official documents i.e. court documents are sent to there
What documents must be kept at the registered office?
o Board meeting minutes
o General meeting minutes
o Statutory books (a company can opt for these to be held at Companies House)
What are the statutory books?
Records which a company is required by statute to maintain such as registers for members, directors and directors’ residential addresses
What must the company do if it wants to change the registered office?
- Take a board resolution.
- File Form AD01 at Companies House
Where a company changes registered office, what is the position in relation to the old address?
Documents can be sent to the old address for up to 14 days after the change. This is important in terms of service of court documents.
How many directors must there be on incorporation ?
Every company must have at least one director who is a natural person (i.e. a human being).
LTDs - at least 1 director
PLCs - at least 2 directors
What is the minimum age to be a director of a company?
16
What information about the company’s directors is needed for IN01?
Their name
DOB
Residential address
Service address
What is the position in relation to the director’s residential address and service address?
Residential address - private (unless they list their service address as their residential address). However, they are shared with public authorities and credit reference agencies.
Service address - public
Can a director privatise their residential address from public authorities and credit reference agencies?
They would need to make an application and this will only be approved if there is a serious risk of violence or intimidation.
They will need to provide evidence
Does a LTD need a company secretary?
No.
Does a PLC need a company secretary?
Yes.
What information does the IN01 require about the company secretary?
Their name and service address.
Can a director be the company secretary?
Yes.
Can a director be the company auditor?
No.
What is the company secretary’s role?
Responsible for administrative tasks i.e. filing documents with CH and keeping board minutes
Are directors responsible for a company secretary’s failures?
Yes. Having a CS doesn’t relinquish responsibilities of the directors, they are still liable if the CS fails to carry out their duties
What are a company’s first shareholders called?
Subscribers
What information does the IN01 require about the subscribers?
Name
Address
Details of their shareholdings
What is the maximum number of shareholders?
There is not one.
What is the minimum number of subscribers in a PLC on incorporation?
2
What is the minimum number of shareholders in a LTD on incorporation?
1 (but it’s common to have two, each of whom owns one ordinary £1 share)
What information does the statement of capital include?
Details of share capital
Names and address of subscribers
Prescribed particulars
What is meant by ‘details of share capital’?
Number of shares the company has and their total nominal value
What is meant by the ‘prescribed particulars’ and what information does this include?
What type of rights each type of share gives the subscriber, including information about:
what share of dividends they receive;
whether they can exchange (‘redeem’) their shares for money;
whether they can vote on certain company matters; and
how many votes their shares entitle them to.
What are the share capital requirements for an LTD on incorporation?
There are not any.
What are the share capital requirements for an PLC on incorporation?
Must have issued a share capital of £50,000 and sold at least 25% of its shares prior to registration
What is a person with significant control?
Any of the shareholders which:
Hold more than 25% of the shares in the company; or
Hold more than 25% of the voting rights in the company; or
Hold the right to appoint or remove a majority of the board of directors of the company.
What information does Form IN01 require about persons with significant control?
Name
Service address
Tick the relevant box relating to their control, i.e.:
o More than 25% but not more than 50% of the company’s shares/voting rights
o More than 50% but less than 75% of the company’s shares/voting rights
o 75% or more of the company’s shares/voting rights.
What is the statement of compliance?
This is a declaration signed by the subscribers that they have complied with the regulations of CA 2006
What is the memorandum of association?
A legal statement in a prescribed format that is signed by all subscribers, it sets out:
o That they wish to form a company;
o That they agree to become a SH; and
o Agree to take at least one share each
Is the memorandum of association filed with IN01?
Yes, always.
What are ‘the Articles’?
A collective term for the memorandum of association and articles of association
What documents form a company’s constitution?
o Memorandum of association
o Articles of association
o Certificate of incorporation
o Current statement of capital
o Shareholder resolutions and agreements
o Court orders
o Legislation which affects the constitution
What are the articles of association?
Essentially the company’s rule book
When registering a company, what options does the company have in relation to the articles of association?
- Use the model articles
- Adopt the model articles with amendments
- Supple bespoke articles
What are the model articles?
Standard default articles
When do the articles need to be filed with IN01?
- If they are bespoke articles
- Any amendments to the model articles (amendments only)
The unamended model articles do not need to be filed with Form 1N01. The applicant just ticks the relevant box.
What happens if no articles are filed with Form IN01?
The model articles automatically apply.
When did the model articles come into effect?
October 2009
Are the model articles for PLCs and LTDs the same?
No
What may be the case if the company was incorporated before October 2009?
The company will use the Table A articles (unless they used bespoke AAs or have modernised)
How are a company’s articles amended?
- Special resolution is passed.
- The SR must be filed at Companies House within 15 days of being passed
- The amended articles must be filed at Companies House within 15 days of them taking effect
What are the administrative requirements to change the company’s articles?
- The SR must be filed at Companies House within 15 days of being passed
- The amended articles must be filed at Companies House within 15 days of them taking effect
Once incorporated, what must a PLC do?
Obtain a trading certificate before it can do business or trade
If it wants to trade on the stock market, this is a separate application to the stock exchange of choice
What are the requirements for a trading certificate to be issued?
o The PLC’s nominal value of the share capital at least £50,000; and
o At least ¼ of the nominal capital has been paid; and
o The whole of any premium has been paid
What are the administrative requirements to apply for a trading certificate?
Complete Form SH50 and submit this to the ROC
When does a PLC not need to obtain a trading certificate?
Where a company re-registers from an LTD to a PLC it does not need to obtain a trading certificate. This only applies to companies registered as a PLC on original incorporation
What are the administrative requirements to convert from an LTD to PLC?
- Must pass a special resolution. The company must meet the requirements to be a PLC at the time the SR is passed.
- Change their name to inc. PLC
- File the following with Companies House:
o The SR;
o Form RR01 (application for re-registration)
o Revised AA
o Balance sheet and written statement from the company’s auditors
o Valuation report on any shares that have been allotted for non-cash consideration between the date of the balance sheet and passing of the SR
What must be filed with Companies House when transferring from LTD to PLC
o The SR;
o Form RR01 (application for re-registration)
o Revised AA
o Balance sheet and written statement from the company’s auditors
o Valuation report on any shares that have been allotted for non-cash consideration between the date of the balance sheet and passing of the SR
If the LTD meets the requirements to transfer to a PLC, what will Companies House do?
Issue a certificate of incorporation.
Upon incorporation, what will the directors need to do?
Have a board meeting (or pass a written resolution) to make the decisions about how the company will be run
What decisions will the directors need to make at the board meeting after incorporation?
o Whether there will be a chair of the board
o Whether to open a bank account (they will need to tell the bank who can make payments)
o Whether to have a company seal
o Whether to change the company name
o Whether to change annual accounting period (standard is the last day of the month the company was incorporated in)
o Appoint an auditor (unless exempt)
o Consider what insurance to put in place
What other issues need to be dealt with on incorporation?
o Inform HMRC of incorporation (unless done online)
o Ds need to register with HMRC to arrange for a deduction of PAYE and NI from salaries
o Company must register for VAT
o SHs may want to enter into a SH agreement
when can Companies House reject an application to register a name?
where it believes the name is:
- intended to facilitate fraud
- compromised of or contains a computer code
- is likely to have a false impression that the company is connected to a foreign government or an international organisation whose members include two or more countries or territories (or their governments).
when can Companies House direct a company changes its name?
where the name has been used, or is intended to be used, by the company to facilitate fraudulent activity.
what can Companies House do if a company fails to change its name? What is the timescale for compliance?
if a company does not comply within 28 days, CH can choose a new name for the company i.e. its registered number
what can Companies House do immediately following the direction to change the company’s name?
suppress the name from the register until the company has responded to the direction
what is the consequence if the company refused to comply with a direction to change its name?
it is a criminal offence
what does the Company Names Tribunal do?
If there’s a conflict about a company name (e.g., someone claims that a company is using a name that is identical or too similar to a name associated with their business or goodwill), it is the Company Names Tribunal that decides the case.
what will issues might the Company Names Tribunal adjudicate?
The Tribunal looks at whether the name in question might:
- Exploit another company’s reputation (goodwill);
- Mislead people due to its similarity to an existing name; or
- Whether someone is seeking payment to release a name
what is the relationship between Company Names Tribunal and Companies House?
Companies House has recently been granted new authority to act in specific areas concerning company names. However, their role is limited to administrative or regulatory functions, not resolving disputes about the potential misuse of company names.
The Company Names Tribunal is part of the Intellectual Property Office and deals with disputes.
what does it mean that the registered office address must be appropriate and the effect of this?
it will be ‘appropriate’ if any documents sent there can be expected to come to the attention of the person acting on behalf of the company
the effect is that PO Boxes are not permitted
what can Companies House do if the registered office address does not meet the requirements?
Companies House can change the office address (usually to CH’s address)
what is the effect of a non-compliant registered address?
Both the company and its directors are guilty of a criminal offence which is punishable by fine
what is an ‘appropriate email address’?
if emails sent to it by the registrar would be expected to come to the attention of a person acting on behalf of the company.
explain ‘statement of lawful purpose’
this is a new element on form IN01 which confirms the company is being formed for lawful purposes
what power does Companies House have in relation to the service address of a director?
they can change this is they do not think it is an address which the director can be effectively served at
what power has ECCTA 2023 given the Registrar of Companies?
Registrar of Companies now has the power to query filings, reject filings and/or request further evidence, and to remove material from the register more swiftly than before.
what are the offences ECCTA 2023 with regard to providing information to Companies House?
- to provide, knowingly or recklessly, misleading, false or deceptive information
- to provide misleading, false or deceptive information without reasonable excuse
